AFTER failing to enlist the support of financial institutions and the Securities and Exchange Board of India (SEBI) on a hard underwriting plan, the Government is set to proceed with the original proposal on the first public issue in carmaker Maruti Udyog Ltd (MUL) involving an offer of 36 lakh shares at Rs 2,300 per share.

The first public issue in Maruti after the Japanese Suzuki Motor Corporation (SMC) acquired a majority shareholding in the company through a rights issue early this year, has the blessings of the Disinvestment Minister, Mr Arun Shourie.

Though the market is in a sluggish state, the Maruti IPO, expected to be kicked off sometime in January next year, could generate a lot of interest among the public, Ministry sources said.

The public will have to buy the Government's 36 lakh shares on offer at Rs 2,300 per share. If there were any unsubscribed portion, it would have to be underwritten by Suzuki at Rs 2,300 per share in accordance with the revised joint venture agreement signed between the two sides.

If the public offer failed to find any takers, the entire 36-lakh shares offered by the Government from its kitty would have to be underwritten by Suzuki at Rs 2,300 per share, the sources said. But, Suzuki was extremely reluctant to abide by its underwriting commitment for the 36-lakh shares at Rs 2,300 per share.

Having acquired management control in Maruti and given the poor market conditions, Suzuki and the Government had, therefore, worked out a plan to free the Japanese company from the underwriting obligation by adopting a "hard underwriting" scheme.

The upside of this plan was that the Government would net more than the Rs 2,300 per share committed by Suzuki by roping in global and domestic financial institutions to underwrite the issue at a higher price of about Rs 2,500 per share. And, the underwriting obligations would get transferred from Suzuki to the financial institutions.

The Government and Suzuki have been negotiating with financial institutions for the hard underwriting plan. But, a SEBI stipulation on the hard underwriting plan combined with a slump in the car industry due to intense competition scotched the success of the plan.

"Given these difficulties, the Disinvestment Ministry had put up a note to Mr Shourie on going ahead with the original plan on the first public issue in Maruti," the sources said.